With the end of the 2020-21 financial year behind us, you’ll soon be receiving your annual super fund statement. Don’t file and forget. Here’s what you must check.
These statements should begin arriving in letter boxes and inboxes from this week. It will be the first time they fully encompass the pandemic period, so the figures and graphs may look a little different compared with what you’re used to seeing.
During the early stages of the financial year, lockdowns were in full swing around Australia, particularly in Victoria. Unsurprisingly, super fund returns had plummeted, but unexpectedly bounced back in spectacular fashion during the second part of the year to record highs.
Superannuation research and consulting firm SuperRatings predicts the June 2021 quarter will see the average super fund return an incredible 17.1 per cent. It advises that a fund is generally considered to be well performing if it achieves a return of around 8.5 per cent each year.
“The way in which funds have weathered the COVID-19 storm shows the resilience of funds’ portfolios, as well as the levers they have in place to protect members when the market ride becomes bumpy,” SuperRatings told The Sydney Morning Herald.
Check your asset classes
Given these record-setting times, it pays to make sure your fund is taking maximum advantage of the situation. Make sure you have your money invested in the right type of asset class for your circumstances.
“That 17.5 per cent return is for a super fund with 60-76 per cent invested in growth assets, such as shares and property – likely the case if you did not choose a specific investment option,” says finance author Nicole Pederson-McKinnon.
“If you chose a fund with a higher concentration of growth assets – because you are younger and have time to ride out sharemarket volatility – you may have done even better.
“Fund investment options with higher concentrations of less-risky assets, often held by those nearing retirement, would probably have dampened returns.”
The Productivity Commission (PC) calculates that the difference in savings between a typical full-time worker in a bottom-quartile fund and one in a top-quartile fund would be $660,000 over a lifetime
Check your fees
The balance shown on your super statement will be minus any fees charged for the year, but it is still important to be aware of what you’re being charged as fees can have a big impact on your final balance.
“Your returns are reported net of fees but it is still a good idea to know what you are paying because while investment performance is a variable, some fees can be fixed,” says Ms Pederson-McKinnon.
The commission warns that an increase of just 0.5 percentage points could cost a full-time worker around $100,000 by the time they reach retirement.
Research group SuperGuide says average fees in Australia are around $550 on a balance of $50,000.
Check your insurances
As well as annual fees, super funds also provide insurance policies for total and permanent disability (TPD) and life cover.
Under the new super reforms, if you move funds, any insurance you have does not automatically go with you – you need to make a fresh application to the fund you intend to join.
Make sure your level of cover is right for you, as these premiums can take a chunk out of your balance over a long period. If you’re single or have no children, consider whether life insurance is worth the expense.
Read the forecast
Under the forecast section on your statement, you’ll find the predicted balance of your fund at retirement age. Most funds will also list the amount you will need to retire comfortably.
The amount quoted by super funds is often lower than what is realistically needed to maintain your desired lifestyle in retirement.
Moneysmart‘s superannuation calculator is an effective tool for calculating an accurate amount needed for retirement. And remember, the government launched a new online fund comparison tool, YourSuper, on 1 July to make it easier to choose a better fund.
Have you received your super statement? Will you carefully check out all the key areas suggested? Are you on track to retire comfortably or maintain your desired retirement? Let us know in the comments section below.
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